Four More Years!

Because of his complicity with the Bush Gang’s irresponsible wartime stimulus to the US economy — largely consisting of enticing people to speculate on their homes by creating an artificially low interest rate coupled with drastic inflationary spending and a massive nontaxable transfer of wealth from the middle classes to the upper classes — it comes as no great surprise that Bush nominated the almost-octagenarian Chief Money Guy Greenspan for yet another term at the funds spigot. But larger forces than political favouritism are gathering that will contrain Greenspan’s ability to sustain this false recovery beyond the short-term…

The Fed is lending at sharply negative real interest rates. The fed funds rate of 1% minus the latest inflation rate of 2.3% gives a negative real interest rate of 1.3%. The 20-year average is a positive rate of 2.4%. To get to 2.4% now would mean hiking the fed funds rate to 4.75% … Keeping the economy afloat by inflating a credit bubble is the most stupid thing any central bank could do, but they do it again and again. The Fed under Greenspan took that stupidity to a new high.